Will 2012 finally be the year the tide doesn’t just turn but roars?
This story first appeared in the February 13, 2012 issue of WWD. Subscribe Today.
Sales at clothing and accessories stores perked up last year, climbing 5 percent to almost $226 billion, according to adjusted data from the U.S. Census Bureau, but whether the gain is momentary or long lasting is an open question. Encouraged by several of the country’s job indicators pointing to economic improvement, vendors and retailers arriving in Las Vegas for WWD MAGIC, opening today and running through Wednesday at the Las Vegas Convention Center, are more upbeat than in recent seasons about their business prospects, but they aren’t ready to abandon the downturn-induced survival tactics as the legacies of the recession — the rise of conscious consumption, ongoing price pressures and demand for discounts — endure.
“I think that the worst is past,” said Simone Legno, artist, creative director and co-founder of Tokidoki. He anticipated the Los Angeles-based, Japanese-inspired lifestyle brand would perform better at WWD MAGIC than a year ago because of the economic progress and, he added, “We are a bit more experienced, and the product is better.”
“The brick-and-mortar that has survived with better leases going forward and a supply of quality product is starting to find its place, finally, and that’s after a huge fallout,” said Eric Jones, chief executive officer and founder of Santa Barbara, Calif.-based Luxury Apparel Group Inc., which owns CoutureCandy.com, an online fashion retailer that also provides e-commerce services to brick-and-mortar boutiques.
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Retailers’ open-to-buys aren’t yet back to prerecession form, however. “They are a lot tighter,” said Bruno Schiavi, designer, founder and president of Australian fashion supplier Jupi Corp., which produces the Kardashian Kollection and Dr. Rey Shapewear, and is launching PM Collection with Peter Morrissey at the apparel trade show. “Retailers are being a lot more careful. They are not overstocking themselves.”
Retail skittishness is a pragmatic response to the lack of persistent, sizable economic expansion. At 45-year-old Willow Tree, which has men’s and women’s stores in Wyandotte, Mich., an area heavily dependent on the auto industry that was hit hard by the recession, the recovery has come in fits and starts. “This year is better than last year. The year before was much better, though. Last year, we had a little bit of a slip,” said Janelle Rose, a Willow Tree buyer.
With so much uncertainty, retailers avoid making long-term bets on merchandise. While scouting brands at WWDMAGIC and other trade shows in Las Vegas, Rose will exclusively concentrate on spring. “We don’t ever shop that far out,” she said. “We don’t like to commit all of the dollars that far in advance.”
“To buy six months out makes no sense anymore,” said Lisa Kline, who shuttered her namesake stores on Robertson Boulevard in Los Angeles but is heading to fashion e-commerce with vaniti.com. “American brands are doing tighter deliveries, which I have always liked as a buyer. The trends change so fast.”
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Not only do trends change quickly, they are spreading throughout the country faster than ever, hastened by social media. Through Willow Tree’s Facebook page and blog, the store can introduce trends. As a result, the lag time between when trends catch fire on the Coasts and when they hit the Midwest, Rose said, is shortening. With leggings, for instance, she pointed out that Willow Tree’s customers caught on to them last year, after New York and Los Angeles, but they have really embraced them. “Now, [customers] have to have multiple leggings,” she said. “They were resistant at first.”
Unusual weather patterns are another reason buyers are being shortsighted. “We don’t have an exact season anymore. Winter blends into spring-summer. Spring and summer blend into fall,” said Schiavi. “If buyers do a typical fall buy, and they don’t get fall weather, they are stuck…We are selling maxidresses at the moment, which is insane, but I live in California, and the weather has been amazing.”
Regardless of the season, the vast majority of shoppers are reluctant to spend large sums with their financial future still in doubt. To cope with this parsimony, vendors continue to be pressed to reduce prices. And, almost inconceivably after season upon season of price cuts, many deliver on their efforts to keep prices down.
“All the prices are really affordable, without people saying it anymore,” said Kline. “Before, when you walked up to the booth, they would say, ‘This is at your price point,’ to get you to look at it. Now, the prices are just affordable.”
Schiavi has slashed prices on items in his lines as much as 10 percent, partially by limiting embellishment. “If your prices are going down, then the buyers are more receptive to coming on board,” he said. “You have to do something in terms of your price. You can’t raise your prices when everyone is lowering them, and everyone is lowering them.”
The real trick is making clothes affordable, while coping with mounting production and material costs. Alicia Estrada, designer and ceo of vintage-inspired dress resource Stop Staring, said prices on select fabrics she uses have risen 30 percent but that she doesn’t pass the full increase on to retail. Instead, a dress that’s $75 wholesale might go up only to $81 or $83.
“I will take a hit,” she said. “At the same time, as a business, you have to mark up [a small amount], otherwise you go out of business.”
Even if some wholesale prices shift slightly upward, Estrada stressed she is careful to maintain healthy margins for retailers. “Most of my stores are doing keystone or greater. Some stores are doing 300 percent markup on Stop Staring,” she noted.
On the production end, elevated labor costs in China have forced vendors to reconsider manufacturing there. Tokidoki has moved production of basic T-shirts to Guatemala. Currently, around 30 percent of the brand’s apparel manufacturing is in Guatemala, with the rest staying in China. “Prices in China are going higher and higher,” said Legno, but he noted it is not easy to replace Chinese work. “China is still a great place to manufacture. They do really good products.”
Schiavi is doing more manufacturing in the U.S. For example, his Lisa Kelly Swimwear line is all made in America. “To me, it is about supporting local manufacturing and also supporting local trade at the same time,” he said.
The decision to go with American manufacturing can be a selling point at retail as well. “Made in America in my opinion has been a key. I think people really believe in it,” said Estrada, whose Stop Staring dresses are made in Los Angeles. “People want to support American-made products.”